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Chinese President Xi reiterated his call for action for China to step up development of technology critical to national security, issuing a strong reminder as escalating U.S. sanctions jeopardizes Beijing’s efforts to become self-reliant on semiconductors, among other high-tech equipment. Xi invoked during a Communist Party summit the so-called “whole nation system”, which helped strengthen China’s nuclear and space programs. He also ordered top officials to pool their resources and focus on breakthroughs crucial for the country’s future, urging the government to play a more active role.
Xi’s personal intervention proves there is growing concern in Beijing about the increased U.S. efforts to hamper China’s technological advances, especially regarding the semiconductor, A.I. and biotech fields. While Xi’s remarks were scarce on details, it signals a goal to give the campaign a larger standing point in party policy, especially since it came under the spotlight a little more than a month before the five-yearly Communist Party Congress.
The U.S., after years of targeting specific companies like Huawei, has started to broaden restrictions on the entire Chinese economy. The Biden administration implemented new controls over the sale of artificial intelligence chips to Chinese customers, a blow to the development of cutting-edge technologies, while weighing an executive order that would curtail investment in the country.
In calling for direct government intervention, Xi continues to pursue his stance in recent years that give greater incentive to state institutions over private tech giants such as Alibaba and Tencent in spurring technological advancement. Since 2020, Beijing has cracked down on private tech giants, particularly in the consumer internet arena.
An escalation in U.S. efforts would only stoke increasing frustration in Beijing with a years-long failure to develop semiconductors that can replace US circuitry.
China has cracked down on top chip industry figures in recent months with a flurry of anti-graft probes. Senior officials are angry at how tens of billions of dollars funneled into the sector over the past decade haven’t produced the sorts of breakthroughs that emerged from previous national-level scientific endeavors. Instead, the perception is that Washington has managed to strong-arm Beijing and successfully contain its technological ambitions.
Xi is expected to receive a historic third term as party chief at the congress next month, despite a slowing economy, geopolitical tensions and frustrations over his zero-tolerance Covid strategy. The move will extend his mandate to pursue sweeping goals to overhaul the country’s technology sector.
First introduced under Mao to help China industrialize, the “whole nation” approach was crucial for Beijing to attain a number of top national priorities. After that it was largely set aside as officials shifted to focus on economic growth. But following a series of U.S. sanctions that exposed the vulnerabilities of China’s chip capabilities, Xi is once again reactivating the mechanism to achieve breakthroughs in advanced chip development and manufacturing.
About a trillion dollars of government funding have been set aside under the technology initiative, part of which will be used by central and local governments to jointly invest in a series of third-generation chip projects. Top chipmakers and research institutes have submitted proposals to the ministries of science and information technology, all vying for a place in the national program and a share of the financing.
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